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Paulwell accuses JPS of 'monopolistic arrogance'

Published:Friday | May 18, 2012 | 12:00 AM
Kelly Tomblin, new CEO of Jamaica Public Service Company. - Rudolph Brown/Photographer
Minister of Science, Technology, Energy and Mining Phillip Paulwell.
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Steven Jackson, Business Reporter

Threatens sale of utility to new investors

Energy minister Phillip Paulwell says that Govern-ment can, as a last option, sell Jamaica Public Service Company (JPS) to new investors rather than allow the utility to maintain its "monopolistic arrogance".

Paulwell did not say how Jamaica would force the sale of the power company, which would likely require its takeover if its owners are hostile to the plan, given the Government's minority 19.9 per cent holdings.

"There are serious players coming to us and any implied threat can be responded to," Paulwell said midweek.

Its the latest tit-for-tat surrounding the push to end JPS' monopoly on power distribution, and follows comment by JPS CEO Kelly Tomblin Tuesday that Jamaica would likely have to buy out the majority owners of the utility if it wanted to pursue liberalisation.

JPS' current exclusive licence has another 16-year run to 2027.

"I don't believe that Government has to buy it back," he said, in response to Tomblin's assertion.

"People are salivating to take part in the energy sector. The Government won't go there, but players are salivating to get into the market".

JPS is owned 40 per cent by Marubeni Corporation, 40 per cent by Korea East-West Power and 19.9 per cent by the Government of Jamaica. The other 0.1 per cent is held by individuals.

The cash-strapped Government has little capacity to buy out Marubeni and East-West Power's stake in JPS. The utility is one of the largest companies in Jamaica, with total assets valuing US$1.05 billion (J$91 billion), and a net worth of US$371 million (J$32 billion) as at December 2011.

Private negotiations

Paulwell told the Financial Gleaner that Tomblin's remarks, compounded by earlier statements attributed to JPS chief financial officer Dan Theoc, prompted him to break his silence.

"I describe the comments as monopolistic arrogance," he said. "The Jamaican people gave us a mandate to liberalise the sector," the minister said, adding that private negotiations were ongoing with the Asian majority owners in that regard.

"The chairman asked us not to be so strident in our views."

Government wants to liberalise the sector to reduce the cost of electricity to consumers and businesses, but Tomblin argued that it would lead, instead, to higher power bills.

To that Paulwell said: "Nonsense. Let me not use that word, but I strongly disagree. It will certainly lead to lower prices," he shot back.

Paulwell thinks liberalisation can cut the price of electricity down by 60 per cent: 30 per cent based on adding a new fuel source, liquefied natural gas; and 30 per cent based on competition.

Paulwell also said he will soon meet the Asian shareholders to negotiate allowing competitors to interconnect with the JPS-owned power grid.

"In July, I will go to Korea and Japan to meet with the shareholders to advance talks on liberalisation," he said.

"I intend to negotiate and it will be a 'give and take'; but certainly you will see a change in the distribution of electricity. We are not intending to replicate the grid. You can interconnect to it."

Currently, some 30 per cent of Jamaica's "900-megawatt capacity", according to Tomblin, comes from independent power producers which compete to set up generation units to sell power to JPS. They, however, cannot sell power directly to customers.

The power utility recently announced preliminary plans to build a US$475-million 100-megawatt petcoke fuel plant as the second phase of its US$616-million LNG project. These projects fall under its five-year US$1.5-billion capital expenditure programme.

business@gleanerjm.com